Bill Text: IA SF2168 | 2017-2018 | 87th General Assembly | Introduced

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Bill Title: A bill for an act relating to shortening the periods of time for redeeming real property from foreclosure and delaying sale of foreclosed property. (Formerly SSB 3053.)

Sponsorship: Committee Bill

Status: (Introduced - Dead) 2018-03-13 - Withdrawn. S.J. 659. [SF2168 Detail]

Download: Iowa-2017-SF2168-Introduced.html

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Senate File 2168 - Introduced




                                 SENATE FILE       
                                 BY  COMMITTEE ON COMMERCE

                                 (SUCCESSOR TO SSB
                                     3053)

                                 (COMPANION TO LSB
                                     5056HV BY COMMITTEE ON
                                     COMMERCE)

                                      A BILL FOR

  1 An Act relating to shortening the periods of time for redeeming
  2    real property from foreclosure and delaying sale of
  3    foreclosed property.
  4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN



  1  1    Section 1.  Section 535.8, subsection 4, paragraph e,
  1  2 subparagraph (1), Code 2018, is amended to read as follows:
  1  3    (1)  Notwithstanding section 628.3 when a foreclosure of a
  1  4 mortgage on real property results from the enforcement of a
  1  5 due=on=sale clause, the mortgagor may redeem the real property
  1  6 at any time within three years eighteen months from the day of
  1  7 sale under the levy, and the mortgagor shall, in the meantime,
  1  8 be entitled to the possession thereof; and for the first
  1  9 thirty fifteen months thereafter such right of redemption is
  1 10 exclusive. Any real property redeemed by the debtor shall
  1 11 thereafter be free and clear from any liability for any unpaid
  1 12 portion of the judgment under which the real property was
  1 13 sold. The right of redemption established by this paragraph
  1 14 is not subject to waiver by the mortgagor and the period of
  1 15 redemption established by this paragraph shall not be reduced.
  1 16 The times for redemption by creditors provided in sections
  1 17 628.5, 628.15, and 628.16 shall be extended to thirty=three
  1 18  sixteen months in any case in which the mortgagor's period
  1 19 for redemption is extended by this paragraph. This paragraph
  1 20 does not apply to foreclosure of a mortgage if for any reason
  1 21 other than enforcement of a due=on=sale clause. As used in
  1 22 this paragraph, "due=on=sale clause" means any type of covenant
  1 23 which gives the mortgagee the right to demand payment of the
  1 24 outstanding balance or a major part thereof upon a transfer by
  1 25 the mortgagor to a third party of an interest of the mortgagor
  1 26 in property covered by the mortgage. This paragraph applies to
  1 27 any foreclosure occurring on or after May 10, 1980. However,
  1 28 this paragraph does not apply if the lender establishes, based
  1 29 on reasonable criteria which are not more restrictive than
  1 30 those used to evaluate new mortgage=loan applications, that the
  1 31 security interest or the likelihood of repayment is impaired as
  1 32 a result of the transfer of interest.
  1 33    Sec. 2.  Section 628.3, Code 2018, is amended to read as
  1 34 follows:
  1 35    628.3  Redemption by debtor.
  2  1 The debtor may redeem real property at any time within
  2  2 one year six months from the day of sale, and will, in the
  2  3 meantime, be entitled to the possession thereof; and for the
  2  4 first six three months thereafter such right of redemption is
  2  5 exclusive. Any real property redeemed by the debtor shall
  2  6 thereafter be free and clear from any liability for any unpaid
  2  7 portion of the judgment under which said real property was
  2  8 sold.
  2  9    Sec. 3.  Section 628.5, Code 2018, is amended to read as
  2 10 follows:
  2 11    628.5  Redemption by creditors.
  2 12    If no redemption is made by the debtor as above provided,
  2 13 thereafter, and at any time within nine four months from the
  2 14 day of sale, said redemption may be made by a mortgagee before
  2 15 or after the debt secured by the mortgage falls due, or by any
  2 16 creditor whose claim becomes a lien prior to the expiration of
  2 17 the time allowed for such redemption.
  2 18    Sec. 4.  Section 628.15, Code 2018, is amended to read as
  2 19 follows:
  2 20    628.15  After nine Creditors after four months.
  2 21    After the expiration of nine four months from the day of
  2 22 sale, the creditors can no longer redeem from each other,
  2 23 except as hereinafter provided.
  2 24    Sec. 5.  Section 628.16, Code 2018, is amended to read as
  2 25 follows:
  2 26    628.16  Who gets property.
  2 27    Unless the defendant redeems, the purchaser, or the creditor
  2 28 who has last redeemed prior to the expiration of the nine
  2 29  within four months aforesaid from the day of sale, will hold
  2 30 the property absolutely.
  2 31    Sec. 6.  Section 628.26, Code 2018, is amended to read as
  2 32 follows:
  2 33    628.26  Agreement to reduce period of redemption.
  2 34    The mortgagor and the mortgagee of real property consisting
  2 35 of less than ten acres in size may agree and provide in the
  3  1 mortgage instrument that the period of redemption after sale
  3  2 on foreclosure of said mortgage as set forth in section 628.3
  3  3 be reduced to six three months, provided the mortgagee waives
  3  4 in the foreclosure action any rights to a deficiency judgment
  3  5 against the mortgagor which might arise out of the foreclosure
  3  6 proceedings. In such event the debtor will, in the meantime,
  3  7 be entitled to the possession of said real property; and if
  3  8 such redemption period is so reduced, for the first three
  3  9  months month after sale such right of redemption shall be
  3 10 exclusive to the debtor, and the time periods in sections
  3 11 628.5, 628.15, and 628.16, shall be reduced to four two months.
  3 12    Sec. 7.  Section 654.20, subsection 1, Code 2018, is amended
  3 13 to read as follows:
  3 14    1.  If the mortgaged property is not used for an agricultural
  3 15 purpose as defined in section 535.13, the plaintiff in an
  3 16 action to foreclose a real estate mortgage may include in the
  3 17 petition an election for foreclosure without redemption. The
  3 18 election is effective only if the first page of the petition
  3 19 contains the following notice in capital letters of the same
  3 20 type or print size as the rest of the petition:
  3 21    NOTICE
  3 22 THE PLAINTIFF HAS ELECTED FORECLOSURE WITHOUT REDEMPTION.
  3 23 THIS MEANS THAT THE SALE OF THE MORTGAGED PROPERTY WILL OCCUR
  3 24 PROMPTLY AFTER ENTRY OF JUDGMENT UNLESS YOU FILE WITH THE COURT
  3 25 A WRITTEN DEMAND TO DELAY THE SALE.  IF YOU FILE A WRITTEN
  3 26 DEMAND, THE SALE WILL BE DELAYED UNTIL TWELVE SIX MONTHS
  3 27 (or SIX THREE MONTHS if the petition includes a waiver of
  3 28 deficiency judgment) FROM ENTRY OF JUDGMENT IF THE MORTGAGED
  3 29 PROPERTY IS YOUR RESIDENCE AND IS A ONE=FAMILY OR TWO=FAMILY
  3 30 DWELLING OR UNTIL TWO MONTHS FROM ENTRY OF JUDGMENT IF THE
  3 31 MORTGAGED PROPERTY IS NOT YOUR RESIDENCE OR IS YOUR RESIDENCE
  3 32 BUT NOT A ONE=FAMILY OR TWO=FAMILY DWELLING.  YOU WILL HAVE
  3 33 NO RIGHT OF REDEMPTION AFTER THE SALE.  THE PURCHASER AT THE
  3 34 SALE WILL BE ENTITLED TO IMMEDIATE POSSESSION OF THE MORTGAGED
  3 35 PROPERTY.  YOU MAY PURCHASE AT THE SALE.
  4  1    Sec. 8.  Section 654.21, Code 2018, is amended to read as
  4  2 follows:
  4  3    654.21  Demand for delay of sale.
  4  4    At any time prior to entry of judgment, the mortgagor may
  4  5 file a demand for delay of sale. If the demand is filed, the
  4  6 sale shall be held promptly after the expiration of two months
  4  7 from entry of judgment. However, if the demand is filed and
  4  8 the mortgaged property is the residence of the mortgagor and
  4  9 is a one=family or two=family dwelling, the sale shall be held
  4 10 promptly after the expiration of twelve six months, or six
  4 11  three months if the petition includes a waiver of deficiency
  4 12 judgment, from entry of judgment. If the demand is filed, the
  4 13 mortgagor and mortgagee subsequently may file a stipulation
  4 14 that the sale may be held promptly after the stipulation is
  4 15 filed and that the mortgagee waives the right to entry of a
  4 16 deficiency judgment. If the stipulation is filed, the sale
  4 17 shall be held promptly after the filing. At any time prior
  4 18 to judgment, the mortgagor may pay the plaintiff the amount
  4 19 claimed in the petition and, if paid, the foreclosure action
  4 20 shall be dismissed. At any time after judgment and before
  4 21 the sale, the mortgagor may pay the plaintiff the amount of
  4 22 the judgment and, if paid, the judgment shall be satisfied of
  4 23 record and the sale shall not be held.
  4 24                           EXPLANATION
  4 25 The inclusion of this explanation does not constitute agreement with
  4 26 the explanation's substance by the members of the general assembly.
  4 27    This bill shortens the periods of time associated with
  4 28 redemption of real property from foreclosure in Code chapter
  4 29 628.  It changes the period of time that a defendant=debtor may
  4 30 redeem real property from within one year of sale to within
  4 31 six months of sale.  It also changes the period in which the
  4 32 defendant=debtor has the exclusive right of redemption from six
  4 33 months after sale to three months after sale.  The period of
  4 34 redemption by creditors is reduced from nine months after sale
  4 35 to four months after sale.  After those four months, creditors
  5  1 cannot redeem from each other.  Unless the defendant=debtor
  5  2 redeems, the purchaser, or the creditor who last redeemed
  5  3 within four months of the day of sale, will hold the property
  5  4 absolutely.
  5  5    Under current law, a mortgagor and mortgagee can agree to
  5  6 reduce the period of redemption from foreclosure as described
  5  7 in the mortgage instrument to a period of six months.  The bill
  5  8 would allow the mortgagor and mortgagee to agree to reduce
  5  9 the period of redemption by the debtor to three months. The
  5 10 debtor's right of redemption would be exclusive the first
  5 11 month, as opposed to three months.  Under the bill, the time
  5 12 for redemption by creditors would be shortened from four months
  5 13 to two months.
  5 14    The bill also alters Code chapter 654.  The bill changes
  5 15 the notice requirement and rule for foreclosure without
  5 16 redemption by changing the length of time a sale can be
  5 17 delayed when a defendant=mortgagor makes a written demand to a
  5 18 plaintiff=mortgagee to delay sale.  The bill delays the sale by
  5 19 six months from entry of judgment as opposed to the current 12
  5 20 months.  If a plaintiff=mortgagee's petition includes a waiver
  5 21 of deficiency judgment, a defendant=mortgagor's written demand
  5 22 will only result in a three=month rather than a six=month delay
  5 23 of sale following entry of judgment.
  5 24    Notwithstanding Code section 628.3 when a foreclosure of
  5 25 a mortgage on real property results from enforcement of a
  5 26 due=on=sale clause, the bill amends Code section 535.8(4)(e)(1)
  5 27 to shorten the period that a mortgagor may redeem the real
  5 28 property from any time within three years to anytime within
  5 29 18 months from the day of sale under the levy. The bill also
  5 30 shortens the period during which the mortgagor's right of
  5 31 redemption is exclusive from the first 30 months to the first
  5 32 15 months and the period during which creditors may redeem
  5 33 under Code sections 628.5, 628.15, and 628.16 from 33 months
  5 34 to 16 months.
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